Coffee Market Faces Pressure as Brazil's Above-Average Rainfall Boosts Supply Outlook

The coffee futures market is reflecting competing pressures this week, with arabica contracts climbing modestly while robusta faces downward momentum. March arabica (KCH26) gained 1.30 cents, or 0.39%, but March robusta (RMH26) dropped 92 points to register a 2.24% decline, marking a four-week low. The divergence between these two major coffee varieties reveals how different supply factors are reshaping price expectations across the market. Above-average precipitation in Brazil, the world’s largest arabica producer, is fundamentally reshaping the supply narrative and tempering price support.

Brazil’s Rainfall Surge and Production Potential

Somar Meteorologia reported this week that Minas Gerais—Brazil’s dominant arabica-growing region—received 69.8 mm of rain in the week ending January 30, representing 117% of the historical average for this period. While abundant moisture generally supports crop health and yields, it pressures prices by signaling ample future supplies. This positive rainfall performance comes as Conab, Brazil’s official crop forecasting agency, raised its 2025 production estimate to 56.54 million bags in December, a 2.4% increase from the September projection of 55.20 million bags. The accumulating evidence of strong Brazilian production is a key headwind for coffee valuations. Recent export data underscores this dynamic: Brazil’s green coffee shipments fell 18.4% in December to 2.86 million bags, with arabica exports down 10% year-over-year to 2.6 million bags and robusta exports down 61% to just 222,147 bags. Despite shrinking export volumes—typically supportive for prices—the market is focused on the massive production backdrop.

Vietnam’s Rising Robusta Production Weighs Heavily

Vietnam’s emergence as a production powerhouse continues to weigh on robusta prices specifically. Vietnam’s 2025 coffee exports surged 17.5% year-over-year to 1.58 million metric tons, according to the National Statistics Office reported in early January. Production estimates point to even larger supplies ahead: Vietnam’s 2025/26 coffee output is projected to climb 6% year-over-year to 1.76 million metric tons (29.4 million bags), marking a four-year high. The Vietnam Coffee and Cocoa Association (Vicofa) suggested in October that output could be 10% higher than the previous crop if weather remains favorable—indicating supply could expand even beyond current projections. As the world’s dominant robusta supplier, Vietnam’s rising production directly pressures robusta prices regardless of broader market sentiment.

Global Inventory Recovery and Market Supply Signals

Ice-monitored warehouse inventories present a mixed picture but ultimately favor bearish sentiment. Arabica stocks fell to a 1.75-year low of 398,645 bags on November 20 before recovering to a 2.5-month high of 461,829 bags by mid-January. Robusta inventories similarly bottomed at a one-year low of 4,012 lots on December 10, then rebounded to a 1.75-month high of 4,609 lots by last Friday. The inventory recovery signals easing supply tightness and reduces the urgency for spot-market purchases. On the global scale, the International Coffee Organization reported in November that worldwide coffee exports for the current marketing year (October-September) declined just 0.3% year-over-year to 138.658 million bags, suggesting relatively stable shipment flows despite price pressures.

Global Production Forecast: Growth Despite Arabica Weakness

The USDA’s Foreign Agriculture Service painted a complex production picture in mid-December. World coffee production in 2025/26 is projected to rise 2% year-over-year to a record 178.848 million bags. However, this masks divergent trends: arabica production is expected to decline 4.7% to 95.515 million bags while robusta surges 10.9% to 83.333 million bags. For Brazil specifically, 2025/26 output is forecast to slip 3.1% to 63 million bags—a modest decline after the strong recent production estimates. Vietnam’s 2025/26 output is expected to accelerate 6.2% to a four-year high of 30.8 million bags. Perhaps most significantly, ending stocks for 2025/26 are projected to fall 5.4% to 20.148 million bags from 21.307 million bags in 2024/25. While this represents a modest drawdown, the overall picture remains one of adequate global supplies supporting current price levels.

Technical Factors and Near-Term Market Dynamics

Some short-covering activity lifted arabica prices off their lows after they failed to break below last Friday’s 5.5-month nearest-futures low, providing a temporary bounce. However, the broader trend remains challenging as steady-rain forecasts continue for Minas Gerais and other key Brazilian regions. Coffee prices have been under pressure throughout the week amid these mounting supply expectations, and technical indicators suggest support levels remain vulnerable without a fundamental shift in the supply-demand calculus.

The convergence of Brazil’s above-average rainfall, expanding global production, rising Vietnamese output, and recovering warehouse stocks creates a bearish structural backdrop for coffee prices. While individual technical bounces may occur, the weight of supply-side factors suggests prices will likely struggle to establish sustainable rallies without a disruptive weather event or significant demand shift.